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In a recent New York federal case, the Southern District of New York determined whether a commercial policy’s Civil Authority coverage applied to an evacuation order issued due to flooding as a result of Hurricane Sandy. Plaintiff law firm Bamundo, Zwal & Schermerhorn sued its insurer Sentinel Insurance Co. in connection with Sentinel’s denial of coverage for Plaintiff’s loss of business income following the storm.

The case involved two orders; one issued on October 8, 2012, in anticipation of the storm, and one issued on October 31, 2012, after it was recognized how severe the flooding was. The principal issue in the case was whether the insurance policy issued by Sentinel applied where the evacuation order was prompted by flooding, and more specifically, whether the term “Covered Cause of Loss” in the Civil Authority provision of the policy incorporated the Flood Exclusion. In finding that the flood exclusion precluded coverage, the Court emphasized that the flooding directly caused the Mayor to issue the order that specifically prohibited Plaintiff from accessing its office. Therefore, because the evacuation orders were a direct result of flooding, they were not the result of a “Covered Cause of Loss to property in the immediate area,” especially since Plaintiff’s policy expressly excluded flooding from the definition of a Covered Cause of Loss.